Oklahoma State University held its 7th Annual Energy Conference on Tuesday in Oklahoma City, and our man Jay F. Marks (@okenergybeat) was a tweeting machine. You can read his dispatches below and check out Energy Editor Adam Wilmoth’s recap of the conference here. For the speaker presentations, go here.
Canadian billionaire Prem Watsa is SandRidge Energy Inc.’s largest shareholder. His Fairfax Financials held about 12.7 percent of SandRidge’s outstanding stock as of February.
Watsa, who is known as the Canadian Warren Buffett, was largely silent during the Oklahoma City oil company’s proxy fight with TPG-Axon Capital, which ended last month with the hedge fund gaining a foothold on SandRidge’s board while pushing CEO Tom Ward toward the door.
Watsa wasn’t too optimistic about the company’s future when he talked to an investor about SandRidge recently at Fairfax Financials’ annual shareholder meeting in Toronto.
“It’s unfortunate, but we think that TPG is just going to flip it and sell it,” he said. “I mean yeah, we are going to make money on this, but we think that if Tom stayed in and grew value into the business, we think it could be worth 20-something a share.”
SandRidge was trading for less than $5 a share on Tuesday.
Watsa repeatedly expressed his support for Ward, whom he called an “amazing individual.” He praised Ward’s accomplishments at SandRidge and as co-founder of Chesapeake Energy Corp. with Aubrey McClendon.
“The man grew up living and breathing oil and gas. He helped built two great empires all from nothing,” he said. “We were really disappointed, because we knew that Tom could realize significant amounts of the assets. While we did disagree a little on the compensation, we think that Tom is great.”
The Fairfax team believes TPG-Axon ignored the long-term value of SandRidge’s holdings in the oil-rich Mississippian play as it pushed for control of the company, contributor Wilson Wang wrote for investment research site Seeking Alpha. Fairfax also is bullish on natural gas.
The founder of TPG-Axon Capital said Sunday he was not surprised by a Delaware court’s ruling that barred SandRidge Energy Inc.’s board from soliciting votes in an ongoing proxy fight.
“This is just the latest in a pattern of this board of putting their own interests ahead of shareholders – this board simply has no shame,” TPG-Axon CEO Dinakar Singh said. “This is the second time during our solicitation that this board has chosen to waste the company’s resources in a useless court battle in a desperate attempt to entrench themselves.
However, this is hardly surprising, given their record of presiding over a truly singular degree of value destruction and mistreatment of shareholders.”
The New York-based hedge fund is asking SandRidge shareholders to oust the current board in favor of its own nominees. It blames CEO Tom Ward and other SandRidge leaders for the poor performance of the company’s stock, which has lost 80 percent of its value since its initial public offering in 2007.
The SandRidge board has refused to approve the TPG-Axon nominees to prevent a change in control at the company from potentially costing billions of dollars.
A Delaware chancery judge on Friday blocked the company from fighting TPG-Axon’s takeover bid until it acknowledges the hedge fund’s board nominees are qualified to lead a public company.
SandRidge has said its current board is best suited to run the company, urging shareholders to reject TPG-Axon’s efforts. It has not commented on Friday’s court ruling.
The board, led by Ward, has said a change in control like the one sought by TPG-Axon would trigger a default in its credit agreement, forcing SandRidge to offer to buy back all of its outstanding senior notes. It initially put the price tag for such a development at about $4.3 billion, but later backed off that figure.
SandRidge shareholders have until Friday to decide if they want to stick with the current board or let Singh and TPG-Axon’s other nominees take over.
SandRidge Energy Inc. CEO Tom Ward on Friday discussed the possibility of a joint venture in the Mississippi Lime in 2014 or 2015.
During a conference call with analysts, Ward said the Oklahoma City energy company is fully funded through 2014, but that the executives already are working to secure financing to support its drilling budget for 2015 and beyond.
The booming Mississippi Lime oil and natural gas field covers much of northern Oklahoma and western Kansas.
Without naming names, Ward said he expected SandRidge to claim a higher price for its joint venture than other parties in the play.
Ward’s former company, Chesapeake Energy Corp., was widely criticized on Wall Street this week when it announced a $1.02 billion Mississippi Lime joint venture that translates into $2,400 an acre, far less than the $7,000 to $8,000 an acre Chesapeake previously said it expected to receive.
Ward did not address Chesapeake specifically, but he said SandRidge is positioned to command one of the highest rates in the Mississippi Lime.
Ward pointed out that SandRidge has spent more than $450 million on pipeline, electrical and saltwater disposal infrastructure in the area over the past two years.
It requires you to have infrastructure, so if other parties don’t have the infrastructure that we have, obviously, that’s worth something,” he said.
Drilling costs also are a factor, Ward said.
We average about $1.1 million per well less than the average of our peers,” Ward said. “We will save over $300 million this year net to SandRidge just from the average of our peers in drilling wells.”
Ultimately, land — and even the oil and natural gas beneath it — is only one small part of the price operators can command for their producing acreage, Ward said.
When you’re selling acreage, you’re really not selling acreage, you’re selling an enterprise,” he said. “You’re selling the ability for a joint venture partner to come and work with us for decades.”
The board at SandRidge Energy Inc. on Friday issued a statement in support of CEO Tom Ward, who has been accused of “front-running” by one of the company’s largest shareholders.
Hedge fund TPG-Axon Capital, which has asked shareholders to replace Ward and the board, contends entities affiliated with Ward have been “flipping” leases to SandRidge. TPG-Axon detailed its concerns Wednesday in a presentation posted on its website, shareholdersforSandRidge.com.
“The board has reviewed issues related to these allegations several times over the Company’s history and has found no wrongdoing to have taken place,” the board said Friday.
WCT Resources LLC, the company at the center of TPG-Axon’s allegations, is independent of SandRidge, with no non-public access to information about its land and mineral acquisition programs, even though one of its managers is Ward’s son, according to the board. Ward is not involved in the company, which was created by trusts established to benefit his adult children.
“Thus, contrary to TPG-Axon’s assertions, neither the company nor Mr. Ward has the power to “allow” WCT Resources to engage in any business regardless of whether it competes with the company,” the board said. ”As an ongoing business not controlled by the company or Mr. Ward, WCT Resources is free to engage in whatever commerce it deems suitable wherever it chooses.”
The SandRidge board also dismissed TPG-Axon’s concerns about WCT leasing acreage adjacent to the company’s holdings in the Mississippian oil play.
“Given the company’s vast acreage holdings in the Mississippian play, which include interests in over 7,500 sections covering nearly five million acres in 30 counties throughout an area that encompasses approximately 17 million acres, this is an entirely unremarkable fact,” according to the board. ”Virtually all companies active in the play are likely to have some interests that could be characterized as adjacent to the company’s holdings.”
The board said leases secured by TLW Land and Cattle LP were acquired with the purchase of ranch land or other surface acreage, mostly before SandRidge became active in the Mississippian in northern Oklahoma and southern Kansas.
“Mr. Ward disclosed these longtime business interests to the board early in the company’s history and has discussed them with the board several times over the past several years, and the board has found no evidence of impropriety or ‘front running,’” the board said.
TPG-Axon and another large institutional shareholder, Mount Kellett Capital Management, had asked the board to investigate the allegations against Ward. Mount Kellett suggested hiring an independent law firm and forensic accounting firm. It also wants Ward to be suspended until the inquiry is completed.
“While the board’s perspective on these and other issues may diverge from TPG-Axon’s, the company’s directors continue to value the input of its stockholders,” according to the board’s statement. ”As part of its continuing oversight duties, the independent members of the board will consider the requests of TPG-Axon and Mount Kellett for the appointment of independent counsel and other investigative measures concerning the activities surrounding their allegations. “
TPG-Axon Capital did not buy into SandRidge Energy Inc. with an eye on involving itself in the Oklahoma City oil company’s affairs, according to its chief executive.
“We’re not typical activists,” CEO Dinakar Singh said Tuesday on CNBC.
But Singh said the hedge fund identified the stock as one with potential growth value, so it launched an effort to replace CEO Tom Ward and the rest of SandRidge’s board.
Singh, who served as a guest host Tuesday on CNBC’s Squawk Box, said SandRidge has valuable assets, but its overhead spending — including compensation for Ward — are too high.
“This company is the single worst-performing energy stock in the Russell 1000 since its IPO five-and-a-half years ago,” he said. “The stock is down over 70 percent.”
Singh said a leadership change at SandRidge seems to be the only way to rein in the company’s spending.
TPG-Axon, which owns about 6.7 percent of SandRidge’s outstanding stock, has launched a consent solicitation, asking its fellow SandRidge shareholders to approve its plan to replace the board. It has proposed a new board, headed by Singh.
SandRidge has urged shareholders to reject the TPG-Axon plan.
SandRidge Energy Inc. CEO Tom Ward made the list by reporting he received $783,533 worth of “accounting support” from company employees last year. Chesapeake’s Aubrey McClendon was runner up in the same category with $250,000 in “personal accounting support.” In both cases, the Oklahoma City energy executives were allowed to use company accountants for their personal finances.
McClendon also was mentioned for his personal use of Chesapeake’s corporate jet.
Barry Diller, chairman of Expedia and InterActiveCorp., topped the category with $1.28 million worth of personal use of corporate aircraft. Forbes said McClendon would have been a contender, but he did not make the list because the company said he reimbursed Chesapeake for $650,000 of his $1.1 million aircraft use “after consultation between Mr. McClendon and the Compensation Committee.”
An Oklahoma City energy company that is newly focused on oil and liquids production has completed the sale of some of its west Texas assets.
But it isn’t Chesapeake Energy Corp., which has spent much of this year looking to turn some of its lesser assets into cash to fill a large funding gap.
SandRidge Energy Inc., headed by Chesapeake co-founder Tom Ward, on Monday announced it had sold some of its noncore assets to a private party for $130 million.
The buyer was not identified.
SandRidge did not provide any details about the holdings it sold, other than to indicate they are noncore assets that produce about 1,100 barrels of oil equivalent per day.
SandRidge last year completed its transition from natural gas producer to one focused on oil and more lucrative natural gas liquids. The company’s exploration efforts are centered on the Mississippian oil play in northern Oklahoma and southern Kansas, west Texas’ Permian Basin and the Gulf Coast.
SandRidge is creating a new headquarters in downtown Oklahoma City, with an eye toward tripling its workforce there by the time it reaches its 10th anniversary in 2016.
SandRidge Energy Inc. CEO Tom Ward on Thursday again stated his belief that the Mississippian Lime formation in northwest Oklahoma and western Kansas likely will be the next great American oil field.
Speaking on CNBC, Ward compared the area to the Bakken of North Dakota and Montana, where production companies led by Oklahoma City-based Continental Resources Inc. have doubled the size of the country’s oil reserves.
“We’re anticipating that peak production in the Mississippian Lime play will be around 500,000 barrels of oil (per day) before 2020,” Ward said.
SandRidge is the largest player in the Mississippian, followed by fellow Oklahoma City firms Chesapeake Energy Corp. and Devon Energy Corp.
SandRidge Energy Inc. CEO Tom Ward on Friday downplayed his involvement in a hedge fund he fronted with his Chesapeake Energy Corp. co-founder, Aubrey McClendon.
Reuters reported earlier this week that the hedge fund, Heritage Management Co. LLC, operated inside Chesapeake for about five years.
Ward told the news service there was nothing wrong with the arrangement, but some experts said it was rife with potential conflicts.
Chesapeake and McClendon’s personal spokesman have declined to comment on the hedge fund report, but Ward touched on it briefly during SandRidge’s first quarter earnings call on Friday.
“The fund that you read about was formed to manage personal investments and focused on a wide range of commodities, not specifically on energy,” Ward said, according to a transcript of the call.
He said the fund’s day-to-day activities were managed by a group of professionals hired to conduct its business.
“I served as an oversight role as I would for any other personal interest of mine. The time I spent dealing with this fund was relatively minor,” Ward said.
He said the fund stopped trading in 2008.
McClendon did not address the hedge fund in Chesapeake’s earnings call Wednesday, the same day as the Reuters report.